Domestic Reverse Charge for Domestic Supplies of Metal Scrap

Domestic Reverse Charge for Domestic Supplies of Metal Scrap

by | Dec 23, 2025

The UAE Ministry of Finance (‘MoF’) has issued a Cabinet Decision No. (153) of 2025 (‘CD’) on 14 November 2025 which will be effective from 14 January 2026. The new decision aims at expanding the scope of applicability of Reverse Charge Mechanism (RCM) to include Metal Scrap.

The key highlights of the new CD are given below for your reference

Particulars Implications
Effective Date 14 January 2026
Scope of RCM Domestic RCM applies to local supplies of Metal Scrap.
Metal Scrap: Ferrous or non-ferrous metal waste that have commercial value and is useable following its Processing.
Processing:The operation through which Metal Scrap is converted into materials that can be used in the manufacturing of new products, whether by repairing, recycling, or any other method.
Applicability of Decision
  • As per the Decision, a VAT Registered supplier will no longer be responsible to charge and collect VAT on supply of metal scrap
  • Instead, the VAT registered customer will be responsible to calculate the VAT on their purchases and declare it in their VAT return
  • The decision applies only in case the supplier sells the goods to a VAT registered customer and in any other case, the supplier will be responsible to collect and discharge VAT under the normal mechanism
Exclusion Domestic RCM will not apply where the supply of metal scrap is zero-rated (i.e. in case of exports). In such cases, the existing zero-rating provisions will continue to apply.
Conditions to apply domestic RCM Recipient Responsibility:

  • Provide a written declaration to the supplier confirming the intention to resell or use them in processing
  • Confirm VAT registration status with the FTA to the supplier

Supplier’s Responsibility:

  • Obtain a written declaration from the recipient confirming the recipient’s intention to resell or use them in processing
  • Verify the recipient’s VAT registration status using the methods provided by the Federal Tax Authority.
  • Invoice issued by the supplier must contain an explicit statement indicating the application of domestic RCM

The declaration above shall be issued by customer and retained by vendor prior to making the supply
Non-Compliance
  • If the recipient fails to provide required declarations, RCM will not apply and supplier is required to charge VAT at applicable rate on the supply
  • The recipient is restricted to recover of input tax credit on the VAT associated with the transaction if the declaration is not provided to the supplier.
Implications
  • The Decision will help the suppliers and buyers to reduce the cashflow impact caused due to charging VAT on such category of goods which are generally high value in nature
  • These measures have been introduced to curb fraudulent practices observed in certain industries, particularly where high-value goods are traded frequently, and to strengthen VAT compliance and reduce requirement for refund filing, wherever applicable

With this update, the UAE continues to expand the scope of domestic reverse charge, which currently applies (subject to prescribed conditions) to the following supplies:

  • Crude or refined oil, unprocessed or processed natural gas, or Pure Hydrocarbon
  • Precious metals and stones, including gold, silver and diamonds
  • Mobile phones, computers and other specified electronic devices
  • Metal scrap (newly introduced)

Broadly, similar compliance principles apply across all domestic RCM transactions, including supplier verification of VAT registration, declaration requirements, and appropriate invoicing disclosures.

Click to download the Cabinet Decision No. 153

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